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Remarks by Ambassador Michael Froman at the Beyond AGOA Hearing

Remarks by Ambassador Michael Froman at the Beyond AGOA Hearing

Washington, D.C.

January 28, 2016

*As Prepared for Delivery*

On behalf of USTR, I would like to welcome our distinguished guests and friends participating in today’s hearing on policy recommendations for deepening the U.S.-Africa trade and investment relationship.  Today’s hearing is meant to look to the future, but let’s look also at the road we’ve travelled.  In 1998, President Clinton called for “Americans to put a new Africa on our map.” “A new century is coming into view, old patterns are fading away,” he said. Two years later, Congress answered the call by passing the African Growth and Opportunity Act (AGOA) to expand America’s economic ties to Africa.

Today, sixteen years into the “new century,” Africa is not simply emerging. It is “on the move,” as President Obama said in Ethiopia last year. And our ties – which run deep – must evolve to keep pace with changes both within and outside Africa. 

Over the next five years, sub-Saharan Africa’s GDP is forecast to grow 30 percent faster than the rest of the world.  Looking further ahead, sub-Saharan Africa is home to 413 million children under the age of 15.  In 2030, they will make up almost a quarter of the world’s workforce and almost a quarter of its consumers.  These trends signal clearly how central Africa’s next decades will be to the entire world economy and to the United States.  Deeper trade and investment ties with Africa will mean growing markets for U.S. exports – just as they can serve our security interests by preventing conflicts, our development interests by alleviating poverty, and our values through policies that encourage democratic governance, broad-based growth, and strengthened labor and environmental standards.

For Africa, deepening trade and investment ties with the United States will be increasingly critical in the face of the sudden economic headwinds the continent is encountering.  With commodity prices falling and China transitioning toward lower growth, China’s imports from Africa appear to have fallen by half in a single year, from above $110 billion in 2014 to barely $50 billion in 2015.  Africa’s next decade of sustainable growth will require new sources of demand – in agricultural and manufacturing trade, internal integration, and in capitalizing on the continent’s boom in Internet access and mobile use, rather than the resource boom of the last ten years.

America needs Africa.  And Africa needs America.  But how do we go forward from here?

Clearly, we have a strong foundation.  Over the last 15 years, AGOA has helped sub-Saharan countries sharply increase their exports, including a nearly fourfold increase in non-oil exports to the United States, and U.S. direct investment in sub-Saharan countries has nearly quadrupled. AGOA has supported hundreds of thousands of jobs in sub-Saharan Africa.  And the United States has benefited as well, with significant increases in exports since 2000.

To build upon AGOA’s successes, the U.S. government and its African partners launched the Trade Africa initiative with the East African Community (EAC) in 2013, signing a multifaceted Cooperation Agreement in 2015 focused on compliance with WTO standards on trade facilitation, sanitary and phytosanitary measures, and technical barriers to trade.  The U.S. is currently working to expand the Trade Africa Initiative to involve new partners, including Cote d’Ivoire, Ghana, Mozambique, Senegal, and Zambia.  

And, last June, Congress reviewed this record and extended AGOA by ten years, the longest extension in the program’s history, providing African partners a unique opportunity to maximize their gains under the program and creating the greater certainty and predictability that enable businesses to make long-term investments and develop supply chains.

The question now is not whether AGOA is an important tool – it has been and, for many countries, will continue to be vital for the near future.  The question is whether we also need to develop new trade policies for the new Africa, given the broad spectrum of countries that now make it up and the changing global trading system of which it is part.  This is a question that is also on Congress’ mind, with the AGOA extension legislation passed last summer asking us to assess the prospects of putting us on a path to more permanent, reciprocal trade arrangements. 

There are potentially many paths toward that outcome.  It is not necessarily the case that one size fits all.  And we are truly open-minded about where this discussion leads.  We go into this process without preconceptions or prejudice about what it should produce.  Today’s hearing is designed to gather views to help inform this effort.

What we do know is that certainly, new winds are blowing.  Countries – including in Africa – are increasingly moving towards more stable, permanent, and mutually reciprocal arrangements.  The United States has FTAs with 20 countries today, compared to 3 in 2000; though none with sub-Saharan Africa.  African countries are themselves advancing regional integration through regional economic communities and the Tripartite and African Continental Free Trade Area initiatives.  They have also signed onto reciprocal Economic Partnership Agreements (EPA’s) with the EU.  And trading partners like Canada and the EU are increasingly refocusing the scope of their preference programs on the poorest countries.

And, we know – after a year-long review of AGOA – that tariff preferences standing alone are often not sufficient to generate significant new trade and investment.  The policy environment matters.  A company may choose not to invest in a country if prohibitive duties or policies are applied to inputs for products, if intellectual property is not protected, if the market for supportive services is closed, if standards aren’t consistent with international norms, or workers’ rights or the environment are not protected.  Developing regional markets and consistent regional policies are important.  And capacity constraints – such as thick borders and poor infrastructure – can have a dramatic effect.

Any new policy must take these factors into account.  We and our interagency partners have been speaking extensively with African partners, with industry and civil society, with academia and the investor community, with foundations in the U.S. and Africa, and many friends here today about the path forward.  Drawing on the expertise of this diverse and distinguished group, we’ve been working to develop a better understanding of the challenges and opportunities for trade and investment between the U.S. and Africa, and how we can harness the full potential of the U.S.-Africa trade and investment relationship. This input is critical as we prepare a public report, for delivery to Congress in June of this year that will lay out a set of options and roadmaps for advancing the U.S.-Africa trade and investment agenda.   

Let me thank everyone again for your participation in today’s hearing in support of this exciting and important work. We look forward to a vibrant discussion. With that, I’d like to turn to Senators Isakson and Coons – two of the greatest champions of the U.S.-Africa relationship – to share some remarks on this important topic.